Last month, the City of Chicago offered a
substantial tax increment finance (TIF) subsidy of $25 million
to an ailing United Airlines (UAL) if it promised to relocate its operations center to the Willis Tower (formerly the Sears Tower).
Use of TIF as a relocation incentive
is problematic given net new jobs are not being created and TIF is intended to help revitalize downtrodden areas, not encourage occupancy in skyscrapers.
The TIF subsidy encourages UAL to leave its current operations center next door to Chicago’s O’Hare Airport, shifting commutation patterns for 2,800 employees –employees who probably use airport facilities. The operations center used to house UAL’s headquarters between 1961 and 2006 until the city gave tax breaks and incentives to UAL for a new office in the Loop. Why would an airline relocate its operations center 19 miles away from the world’s 4
th
busiest airport?
Historically, Chicago and outlying suburbs use incentives in
controversial ways
. In 1989, Sears, Roebuck & Co. announced that it was seeking to relocate from the Sears Tower to cut costs (see page 36 of our 2003 report,
A Better Deal for Illinois
). The State of Illinois feared losing $411 million in income taxes (from 5,400 jobs) and 2,200 ripple-effect jobs if they left Illinois. An affluent suburb 29 miles northwest of the Loop put together what was the largest subsidy package ever in Illinois history at $178 million. The state not only chipped in but expanded the definition of ‘blight’ in Illinois’ TIF law so that the wealthy suburb could buy 786 acres of land with TIF bonds to be repaid out of Sears’ property taxes.
Although Sears promised to make up shortfalls in the property tax revenues (and did in 1998 and 2001), missing was a clawback relating to the 5,400 jobs which the state based its incentive rationale on from the get-go. Sears never approached the original employment number, which begs the question: did it move out of necessity or to avoid paying for mass layoffs and the negative media attention?
The City of Chicago is in a
pinch
. Two recent winters have threatened the city’s budget to the
brink of collapse
and forced the mayor to
lease the city's parking meters
to a private entity for 75 years. Despite city coffers in ruin, TIF funds overflow. A new
report
by the Chicago Coalition for the Homeless shows TIF-funded units are disproportionately sold or rented to high-income households. Recent investigations indicate that TIF dollars are awarded on
dubious
basis
in lieu of need
in a city full of
questionable
zoning practices. Moreover, a recent $10.4 million TIF deal
fell through
, leaving the city without the jobs it paid for. Despite this, the city
resists
passing TIF
sunshine laws
.
Chicago’s 158 TIF districts covering 30 percent of the city are
diverting
revenues that would otherwise keep
schools solvent
, plow streets,
maintain public transit
, and fix
potholes
. TIF has strayed from revitalizing distressed communities and is instead being used to shuffle tax base across the region. Moving jobs does not create new jobs. TIF reform is long
overdue
in Illinois.